When it comes to missing debt payments, consumers can typically expect to see damage on their credit reports for as long as seven years. The consequences often manifest themselves in the form of higher credit card and mortgage rates, or an inability to get such loans at all in some cases.
However, there is another potential consequence to having a poor credit score - the inability to get a job. This is because a growing number of companies have been using an applicant's credit score to make hiring decisions.
Defenders of this practice point out that it's a helpful way to weed out applicants who may not be suitable for positions involving large amounts of money, particularly in financial services firms. However, credit score-based hiring decisions have also come under growing criticism in light of present economic circumstances, where millions of Americans have been struggling to keep up with monthly payments simply because they have been unable to find a job.
Critics also point out that even the employed can run into sudden trouble with their credit score with one unexpected medical setback, leaving them with thousands of dollars in debt as well as damaged credit.
According to a recent Associated Press report, one human resource industry survey has found that about 60 percent of companies now run credit checks on some applicants, up from 42 percent in 2006.
However, the report also notes that legislators in at least 16 states are now looking at proposals that would ban or limit the practice, largely due to the perception that it helps keep people trapped in a cycle of debt and unemployment.
The wire service also quoted a state lawmaker from Wisconsin as saying there is no evidence to demonstrate that a person with a damaged credit score would do their job more poorly than somebody else.
In fact, critics of this practice have pointed out that the opposite may be true - those with damaged credit may actually turn out to be among the more motivated workers because they have a direct interest in catching up with their financial obligations and getting back on their feet.
Regardless, the practice is unlikely to go away in the short term, which is why it's important for people to keep up with their monthly payments and to check their credit report from time to time for any potential errors or signs of what could be identity theft.